Binary Options Trading have become one of the most preferred options amongst traders, considered very useful for a hedging and speculation tool. Traders might think that Binary options are fairly new strategies, but they have been traded for way more than ten years. The most common way they have been traded was OTC (over the counter)generally amongst two institutional investors, commonly hedge funds and investments banking prop desks. Retail traders were given the right to trade binary options in the year of 2008, and the reputation of this asset class has rocketed up. Here is an article by Secured Options taking you to the history of Binary Options Trading and a quick overview.
What are Binary Options? The best way to describe binary
options is to state that this is the trade that provides two different results,
either the trades concludes in-the-money, meaning winner, or out of the money,
meaning loser. This is in sharp contrast to existing vanilla options where
theories including time decay, volatility, strike price, time to expiration all
go into the pricing. Binary options provide a simple risk reward proposition,
and this stated evidently before going into the trade. ROI of approx. between
60%-90% for “winning trades” and 0-15% for losing trades are placed by a number
of trading sites which are providing binary options.
Binary options are often provided on a range of underlying
assets over most trading platforms. Even though the numbers of stocks is
limited, equities are provided amongst most platforms. It is fair to say that
stock Binary Option is offered only on the biggest, most liquid titles. Most part
of the stock based Binary Options are made up of technology stocks. Binary
Options of Forex are as well introduced over platforms with most major currency
pairs covering up the huge part of the trading. Well-accepted commodities
including gold, silver, oil, natural gas and copper and major indexes worldwide
are found on Binary Options trading platforms.
Expiration seems a little confusing for the traders who are
new traders and are planning to implement Binary Options. It is common to think
that all Binary options carry 1 hour expiration time. This is wrong. Secured Options have witnessed expiration range between 15
minutes on the lowest and up to one month maximum. We don’t think there is lot
of traders going for one- month binary options but some people find it useful.
Binary Options can provide traders with the short time frame and payout
structure of these options are so simple. That is why a lot of traders prefer
one- hour binary options.
